There might not have been impropriety, but things seem out of order for Chanda Kochhar

The ICICI bank machinery has gone out of its way to quell rumours and allegations about their chief executive Chanda Kochhar, one of the most powerful and influential women in India as the boss of India’s largest private bank. In essence, the allegations have it that a loan that ICICI Bank made to Videocon Industries had a quid-pro-quo element to it when the promoters of Videocon sold their share of a renewable energy firm to their partners at a discount. The partner in this case was Deepak Kochhar, Chanda Kochhar’s husband.

The bank has repeatedly claimed that they are only part of a consortium of lenders that loaned the money to Videocon. In all large loan deals, it is almost always a consortium of banks that makes the loan to spread the risk. While the state-owned banks can and often do come under political pressure and corrupt practices, private banks for the large part, especially large private banks with wide public shareholding, do tend to have better risk mitigation and conflict-of-interest practices put in place. Had Videocon serviced its debt properly, there might not have been a problem. However, thanks to calamitous entries into telecom and energy, the group suffered and the loans were declared a Non-Performing Asset. While there are some lacunae in the allegations, the charges in itself are serious and ICICI bank’s redaction has been to sweep them away and ignore them until the inevitable headlines came about.

The ICICI bank board approved of the loans and the bank claims that even the regulator, the Reserve Bank of India got involved and at the same time, Videocon limited themselves had nothing to do with NuPower Energy, the firm in question where Deepak Kochhar and his family have a stake. The transfer of ownership from the Dhoot family to Deepak Kochhar took place after the loan was granted and does raise serious issues about conflict of interest. And because the loan itself is now an Non-Performing Asset, an inevitable question arises is whether Videocon had planned it this way all along. However, that allegation is a hard pill to swallow. While there was a sense of the Wild West in the way loans were sanctioned a decade ago, proving the allegations will be almost impossible in a court of law or even in front of the regulator. For a private bank like ICICI, optics and public relations matter, and while this is a PR disaster it is unlikely that something illegal took place. It would be proper for ICICI Bank to however make public any internal investigation they have done on the issue. Also, in India, the concept of conflict-of-interest is not taken seriously at all, this case should be a wake-up call for companies to understand that the old way of doing things cannot carry on.